N.Y. Regulator Backs Crypto Exchange bitFlyer’s U.S. Operations

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By Lydia Beyoud

New York State’s top financial regulator threw its support behind the operations of virtual currency exchange bitFlyer USA on June 22, even as its Japanese parent company, bitFlyer Inc. came under regulatory scrutiny in its home country the same day.

bitFlyer USA is one of a handful of exchanges to have received the New York Department of Financial Services’s “BitLicense” for cryptocurrency companies. The state’s licensing process is seen as the most rigorous in the country.

“Although Bitflyer Japan is separate and distinct from the company’s US operations, DFS is working closely with our regulated entity to preserve the continued sound operation of Bitflyer USA and to protect consumers,” the agency said in a June 22 statement.

“This action further reinforces and supports the necessity of robust cryptocurrency regulation and cooperation among DFS and global regulators,” the DFS said.

Parent company bitFlyer Inc. is one of six Japan-based exchanges to receive an improvement order from the Japanese Financial Services Agency.

The Japanese regulator has asked the exchanges to improve their internal auditing, anti-money laundering, and identity verification methods, among other actions, for certain existing customers. The other exchanges are Bitbank Ltd., BTC Box Corp., BITPoint Japan Co., Ltd., Tech Bureau Inc., and Quoine Corp. The companies are expected to submit their improvement plans by July 23. The price of bitcoin tumbled approximately 9 percent on some indices following the news, falling to some of its lowest prices this year.

bitFlyer Inc. said it has temporarily halted new account openings in Japan while it re-examines identities for some of its existing customers.

Separate Entities

The exchange’s European operations are separate and unaffected by the Japanese regulatory action.

“bitFlyer USA values the regulatory relationship with NYDFS, and also appreciates the department’s concern and duty to protect New York customers,” a spokeswoman for bitFlyer USA told Bloomberg Law in an emailed statement.

The agency’s statement “also reiterates the point that bitFlyer USA is a separate legal entity from bitFlyer, Inc. (Japan) and as such operates its operations and compliance independently from the Japanese business,” the company spokeswoman said. “Importantly, no deficiencies have been found in bitFlyer USA.”

To contact the reporter on this story: Lydia Beyoud in Washington at lbeyoud@bloomberglaw.com

To contact the editor responsible for this story: Michael Ferullo at mferullo@bloomberglaw.com

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